Written by Marian Tupy, a policy analyst, Center for the Global Liberty and Prosperity at the Cato Institute. Posted with permission from Cato @ Liberty.
It has been said of the neo-cons that they are often wrong but never in doubt. Well, Bill Kristol was at it again, predicting the future with his usual sense of supreme confidence. According to the neo-conservative editor of the Weekly Standard, “It won’t kill the country if Republicans raise taxes a little bit on millionaires… .The Republican Party is gonna fall on its sword to defend a bunch of millionaires, half of whom voted Democratic, and half of whom live in Hollywood and are hostile to Republicans.”
The left has jumped on Kristol’s words. As Andrew Rosenthal wrote in the New York Times, “When even Bill Kristol, the severely conservative Weekly Standard editor, says Republicans should agree to raise taxes on the richest Americans, you have to wonder if the G.O.P. has thought through its post-election, hold-the-line strategy.”
To start with, Kristol misunderstands the opponents of the tax increases on the rich, whose main goal is not to ensure that the rich get to keep more of their money. Their main goal is to prevent the federal government from obtaining a new source of revenue. Why might that be?
During a press conference yesterday afternoon, President Barack Obama laid out some of his terms on the so-called “fiscal cliff,” making it known that he wouldn’t accept a deal with House Republicans that didn’t raise tax rates on higher-income earners. Before the press conference even took place, the White House had rejected House Speaker John Boehner’s initial offer and The Hill noted that Obama would come to the table asking Congress for “$1.6 in new revenues by targeting the wealthy and corporations.”
Boehner, who has said that the talks with the White House are “going to take awhile,” has already said that House Republicans aren’t willing to raise tax rates, which could bring the talks to an impass. During the press conference, Obama said, “I’m open to compromise and I’m open to new ideas.” But, as noted, Obama has already turned away one offer for increased revenues and isn’t likely to budge much from his position.
James Pethokoukis noted that Obama’s tax plan, which supposedly brings a “balanced approach” to the deficit, isn’t balanced (emphasis mine):
[O]nce you begin to dig into the numbers, the plan doesn’t look balanced at all. As the bipartisan Committee for a Responsible Federal Budget noted back then:
With a compromise on the so-called “fiscal cliff” up in the air, investors are showing signs of worry. According to CNBC, many are working to sell off assets to avoid the coming hikes in the capital gains tax that will come at the beginning of the year:
For many of the wealthy, 2012 is becoming a good year to sell.
They’re worried about the “fiscal cliff,” which is when tax cuts expire and spending cuts are set to go into effect at the end of the year.
Fearing an increase in capital gains and dividend taxes, many of the rich are unloading stocks, businesses and homes before the end of the year.
Wealth advisors say that with capital-gains taxes potentially going to 25 percent from 15 percent, and other possible increases in the dividend tax, estate tax and other taxes, many clients are selling now to save millions in taxes.
If the Bush-era tax cuts expire, taxes on capital gains would revert back to its previous rate of 20 percent from its current 15 percent. Another 5 percent may be added from health-care levies and changes in itemized deductions, bringing the rate to 25 percent for many high earners.
Taxes on dividends could go from 15 percent to over 43 percent. And the estate tax could go from 35 percent on estates worth more than $5 million to 55 percent on estates over $1 million.
For the Sake of Intellectual Integrity, Republicans Should Not Cite the CBO When Arguing against Obama’s Proposed Fiscal-Cliff
Written by Daniel J. Mitchell, a senior fellow at the Cato Institute. Posted with permission from Cato @ Liberty.
I’ve commented before how the fiscal fight in Europe is a no-win contest between advocates of Keynesian deficit spending (the so-called “growth” camp, if you can believe that) and proponents of higher taxes (the “austerity” camp, which almost never seems to mean spending restraint).
That’s a left-vs-left battle, which makes me think it would be a good idea if they fought each other to the point of exhaustion, thus enabling forward movement on a pro-growth agenda of tax reform and reductions in the burden of government spending.
That’s a nice thought, but it probably won’t happen in Europe since almost all politicians in places such as Germany and France are statists. And it might never happen in the United States if lawmakers pay attention to the ideologically biased work of the Congressional Budget Office (CBO).
The debate over the “fiscal cliff,” particularly the tax hike for higher-income earners being push by President Barack Obama, is one that is based on an entirely false premise. The argument from Obama and Senate Democrats is that these taxpayers need to pay more to help bring the budget back to a sustainable path. However, the Wall Street Journal explains that tax revenue has been climbing and the real issue is that spending has gotten out of control under Obama:
The nearby table lays out the ugly details. The feds rolled up another $1.1 trillion deficit for the year that ended September 30, which was the biggest deficit since World War II, except for each of the previous three years. President Obama can now proudly claim the four largest deficits in modern history. As a share of GDP, the deficit fell to 7% last year, which was still above any single year of the Reagan Presidency, or any other year since Truman worked in the Oval Office.
Tax revenue kept climbing, up 6.4% for the year overall, and at $2.45 trillion it is now close to the historic high it reached in fiscal 2007 before the recession hit. Mr. Obama won’t want you to know this, but this revenue increase is occurring under the Bush tax rates that he so desperately wants to raise in the name of getting what he says is merely “a little more in taxes.” Individual income tax payments are now up $233 billion over the last two years, or 26%.
Now let’s look at outlays, which declined a bit in 2012. That small miracle was achieved thanks to a 4% fall in defense spending, a 24% fall in jobless benefits, and an 8.9% decline in Medicaid spending.
Since Wednesday, House Speaker John Boehner has been urging President Barack Obama to take the lead on the “fiscal cliff,” a combination of tax hikes and spending cuts set to take effect next year, and has hinted that he’s open to tax reform that would raise revenues while promoting growth. Obama, however, has been pushing a tax hike on higher-income earners, which is a non-starter in the House.
Boehner has also spoken to members of his caucus, telling them that they can’t affford to deal with another fiscal showdown with President Obama:
On a conference call with House Republicans a day after the party’s electoral battering last week, Speakerdished out some bitter medicine, and for the first time in the 112th Congress, most members took their dose.
Their party lost, badly, Mr. Boehner said, and while Republicans would still control the House and would continue to staunchly oppose tax rate increases as Congress grapples with the impending fiscal battle, they had to avoid the nasty showdowns that marked so much of the last two years.
Members on the call, subdued and dark, murmured words of support — even a few who had been a thorn in the speaker’s side for much of this Congress.
It was a striking contrast to a similar call last year, when Mr. Boehner tried to persuade members to compromise with Democrats on a deal to extend a temporary cut in payroll taxes, only to have them loudly revolt.
Yesterday, I criticized House Speaker John Boehner for openly discussing the idea of raising tax revenue are part of the “fiscal cliff” talks. This caused some of my conservative friends to come back at me on Twitter because they noted that pro-growth tax policies raise revenue, but it’s not a tax hike.
Look, I don’t disagree at all on that. What I was trying to say, and I probably didn’t explain it well enough, was that Boehner is negoiating from a point of weakness because of the election and is more likely to make a bad deal. During the debt ceiling debate, Boehner was willing to close loopholes that would have raised some $800 billion in additional tax revenue. President Obama wanted more in revenue, which caused Boehner to back down.
Boehner wants a pro-growth tax policy. That’s great, so do I. Let’s close all the loopholes — no more tax breaks or tax credits — and use that revenue to lower overall tax rates. That’s exactly what I want. Unfortunately, we’re not going to get it right now, and I think that’s the point my conservative friends are missing. Obama and Senate Democrats aren’t interested in economic growth. They’re interested in class warfare, which they think helped them win the election.
House Republicans have stood firm on their opposition to President Barack Obama’s proposed tax hikes, which would come at a time when the economy is growing at an anemic pace. Back in August, the House passed a one-year extension of all current tax rates, hoping that Obama and Senate Democrats would come to their senses, reach a compromise with Republicans and avoid the economic troubles raising taxes would bring in these tough economic times.
Unfortunately, that hasn’t happened. What’s worse was a Washington Post report from September noting House Republicans were preparing to retreat on taxes should President Barack Obama win re-election.
While Republicans are still urging Obama to compromise since raising taxes would hamper an already tepid economic recovery — if not make it worse, House Speaker John Boehner said yesterday that he expects some sort of a deal to be reached during lame-duck session, which will be defined by the outcome of the election:
House Speaker John Boehner doesn’t expect a grand bargain avoiding the fiscal cliff to materialize in a lame duck session of Congress, but that doesn’t mean the country is headed over the edge. Instead, Boehner said Sunday, he thinks Congress and the White House will find a way to punt the looming deadlines on the debt ceiling, the Bush tax cuts and the budget sequester into 2013.